OCC finds major banks not managing risk as well as expected

While small banks were found to have added risk to portfolios to combat the loss in profits after the financial crisis, the Office of the Comptroller of the Currency found that larger banks were not doing much better.

Of the 19 major banks reviewed by the OCC, none passed all five of the categories that looked at internal operations. Further, none of the banks passed the requirements for "internal auditing, risk management or succession planning," according to American Banker. At the conference that presented these findings, there were 1,083 "matters requiring attention," between the banks graded.

The 19 national banks, none of which were mentioned by name, were found to have made few operational changes since before the financial crisis, according to the OCC's report. While banking regulations have changed since the recession, many banks continued lending at similar levels.

Mike Brosnan, an OCC comptroller who oversees large banks, told American Banker he is not worried banks won't be able to improve their reputation and operations in time. He predicts that by July all of the 19 will be able to meet the requirements for one of the five categories, as the OCC has raised the standards the banks were expected to meet, with little preparation. For many of the banks that focus on credit and interest rates, changing the priorities to operations and compliance can require some work.

The OCC expects, with help, all of the banks will pass an audit in the next two years, a few of the banks even sooner.

Until risk management and compliance issues among banks do not need as much supervision, risk assessment software can help banks make loans to qualified borrowers, especially in the midst of new regulations, and help banks prepare for future audits.

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